GLSDetrend—local to unity detrending

[TomDoan]

@GLSDETREND is a local to unity detrending routine allowing for various types of trends, including ones with a break at a known point. This includes the Elliott-Rothenberg-Stock cases (no constant, constant, constant and trend) as well as the Perron and Rodriguez cases (constant and trend with a single break). This just does the detrending, not the actual unit root test(s). For models with breaks, you need to input the break point.

Detailed description

[Anna]

Hey Tom,

I think there is a minor mistake in that program, concerning the case of a break in the intercept only. As far as I can see, the program takes c=23 in that case, but it should actually be 13.5 as in Elliot et. al. if I understand Perron & Rodriguez correctly. They do not consider a break in the level only because this is "just a special case" of Elliot et al.'s slowly evolving deterministics (or so). If this was the case, I think Elliots c-value should be taken and not Perron & Rodriguez, right?

Best wishes
Anna

[Anna]

And another question: I am wondering, why do you write this:

Code: Select all

set yd startl endl = y-%dot(%xt(z,t),%beta)

Why not just "ut" as defined by the last linreg command?

[TomDoan]

Hey Tom,

I think there is a minor mistake in that program, concerning the case of a break in the intercept only. As far as I can see, the program takes c=23 in that case, but it should actually be 13.5 as in Elliot et. al. if I understand Perron & Rodriguez correctly. They do not consider a break in the level only because this is "just a special case" of Elliot et al.'s slowly evolving deterministics (or so). If this was the case, I think Elliots c-value should be taken and not Perron & Rodriguez, right?

Best wishes
Anna

Although it allows for the BREAK=INTERCEPT option, it won't do it. All the BREAKs are either trend or trend + intercept.

[TomDoan]

And another question: I am wondering, why do you write this:

Code: Select all

set yd startl endl = y-%dot(%xt(z,t),%beta)

Why not just "ut" as defined by the last linreg command?

The previous linreg is on GLS transformed data, but what's needed for yd is the calculation on the original data.